EXHIBIT (A)(3)
ARV ASSISTED LIVING, INC.
ARV PIII PURCHASE ANALYSIS
[ARV LOGO]
ARV PIII PURCHASE ANALYSIS
VALUE COMPARISON
<Table>
<Caption>
VALUE
--------------------------------------------------------------------------------
2000 2001 2001 REIT #1 REIT #2
ASSET UNITS ACTUAL BUDGET FORECAST APPRAISAL OFFER OFFER(C)
----- ----- ----------- ----------- ----------- ----------- ----------- --------
Chandler Villas...... 164 $ 6,050,000 $ 4,100,000 $ 5,400,000 $ 8,500,000(A) $ 5,700,000
Villa Las Posas...... 123 13,225,000 14,225,000 13,675,000 13,250,000(B) 12,500,000
--- ----------- ----------- ----------- ----------- -----------
287 $19,275,000* $18,325,000* $19,075,000* $21,750,000 $18,200,000
=========== =========== =========== =========== ===========
Value Per Unit....... $ 67,200* $ 63,900* $ 66,500* $ 75,800 $ 63,400
=========== =========== =========== =========== ===========
Chandler Villas...... $ 6,350,000 $ 4,170,000 $ 5,975,000
Villa Las Posas...... 14,050,000 15,130,000 14,580,000
----------- ----------- -----------
$20,400,000** $19,300,000** $20,555,000**
=========== =========== ===========
Value Per Unit....... $ 71,000** $ 67,250** $ 71,600**
=========== =========== ===========
</Table>
---------------
* Values include deduction for partnership administration fees.
** Value excludes deduction for partnership administration fees.
(A) Appraisal date June 2000
(B) Appraisal date March 1999
(C) Offer expected by mid-July
1
ARV ASSISTED LIVING, INC.
ARV PILL PURCHASE ANALYSIS
KEY ASSUMPTIONS
<Table>
<Caption>
NUMBER UNITS
------ -----
Assets
Owned Communities......................................... 2 287
Growth Rates (Annual Compounded)
Revenue................................................... 3%
Operating Expenses........................................ 3%
EBITDAR................................................... 3%
Cap Ex.................................................... 5.25%
</Table>
<Table>
<Caption>
AMOUNT PER UNIT
-------- --------
Cap Ex
Actual 1998............................................... $608,235 $2,165
1999...................................................... $164,866 $ 587
2000...................................................... $193,140 $ 687
Budget 2001............................................... $163,496 $ 582
</Table>
<Table>
<Caption>
OWNED LEASED
ASSETS ASSETS
----------- ------
Capitalization Rates
Acquisition............................................... 11% 15%
Terminal Value in 2010.................................... 11% 15%
Discount Rate............................................. 15% 15%
Operating Profits......................................... Half-Year Convention
Sale........................................................ End of 2010
Cost of Sale................................................ Included in purchase
price
Fee to ARV on Sale.......................................... None
</Table>
2
CHANDLER VILLAS
101 S. YUCCA STREET
CHANDLER, AZ 85224
LICENSE NUMBER: RCI-043
[PHOTOGRAPH]
Chandler Villas, located 12 miles southeast of Phoenix, offers spacious
one- and two-bedroom apartments available in five floor plans. Each apartment
features a kitchen and large balcony or patio. The community is comprised of 15
one- and two-story buildings situated on eight acres of beautiful park-like
grounds.
The community offers a grand dining room and two large recreation centers
plus a pool and spa. A beauty shop, library and game room complete with
billiards are all available within the community's expansive grounds.
Located in a tranquil neighborhood setting, Chandler Villas is close to a
number of conveniences including shopping, banks, churches and medical centers.
In addition, the community is only minutes away from the cultural and
recreational highlights of the greater Phoenix area.
[MAP]
3
ARV ASSISTED LIVING, INC.
COMMUNITY SUMMARY
COMMUNITY: Chandler Villas
ADDRESS: 101 S. Yucca Street
Chandler, AZ 85224-8149
OWNER: ARV PIII
<Table>
PHYSICAL INFORMATION:
Year Built:................................................. 1988
Units:...................................................... 164
Licensed Beds:.............................................. 164
Square Footage:............................................. 110,000
No. Floors:................................................. 2
No. Buildings:.............................................. 15
Sprinklered:................................................ Yes
EBITDAR (AFTER MGT & ADMIN FEES):
1998........................................................ $ 747,949
1999........................................................ $ 617,395
2000........................................................ $ 745,772
2001 (Forecast)............................................. $ 534,000
EBITDAR MARGIN (AFTER MGT & ADMIN FEES):
1998........................................................ 34%
1999........................................................ 26%
2000........................................................ 28%
2001 (Forecast)............................................. 19%
AVERAGE OCCUPANCY:
12/31/98.................................................... 98.1%
12/31/99.................................................... 93.8%
12/31/00.................................................... 97.4%
4/30/01..................................................... 96.3%
12/31/01 (Forecast)......................................... 95.6%
ASSISTED LIVING PENETRATION:
12/31/98.................................................... 22.1%
12/31/99.................................................... 19.2%
12/31/00.................................................... 19.0%
2/28/01..................................................... 22.6%
12/31/01 (Forecast)......................................... 22.4%
VALUE INFORMATION(a):
Value at 12/31/00........................................... $6,034,292
Value at 12/31/01 (Forecast)................................ $4,109,091
</Table>
---------------
(a) Value calculated based upon EBITDAR (after management and administration
fees and $500/unit capital expenditure reserve) using an 11% capitalization
rate.
4
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
APRIL 2001
(With Management and Administration Fees Deduction)
<Table>
<Caption>
CHANDLER VILLAS
164 UNITS
96.3%
-----------------------------------
2000 ACTUAL 2001 BUDGET CHANGE
----------- ----------- -------
EBITDAR Before Management & Administration Fees.......... $ 916,269 $ 678,544 (25.94)%
Management Fees -- 5%.................................... (135,134) (137,642)
Administration Fees -- 10%............................... (35,363) (6,902)
----------- -----------
EBITDAR After Management & Administration Fees........... 745,772 534,000
CAP EX @ $500/Unit....................................... (82,000) (82,000)
----------- -----------
NOI...................................................... $ 663,772 $ 452,000 (31.90)%
CAP RATE................................................. 11.0% 11.0%
----------- -----------
Value.................................................... $ 6,034,292 $ 4,109,091
Debt..................................................... (5,096,041) (5,777,915)
----------- -----------
Net Equity Value......................................... $ 938,251 $(1,668,824) (277.87)%
=========== ===========
Per Unit Value........................................... $ 36,794 $ 25,055 (31.90)%
=========== ===========
</Table>
5
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
APRIL 2001
(Without Administration Fees Deduction)
<Table>
<Caption>
CHANDLER VILLAS
164 UNITS
96.3%
-----------------------------------
2000 ACTUAL 2001 BUDGET CHANGE
----------- ----------- -------
EBITDAR Before Management & Administration Fees.......... $ 916,269 $ 678,544 (25.94)%
Management Fees -- 5%.................................... (135,134) (137,642)
----------- -----------
EBITDAR After Management & Administration Fees........... 781,135 540,902
CAP EX @ $500/Unit....................................... (82,000) (82,000)
----------- -----------
NOI...................................................... $ 699,135 $ 458,902 (34.36)%
CAP RATE................................................. 11.0% 11.0%
----------- -----------
Value.................................................... $ 6,355,775 $ 4,171,836
Debt..................................................... (5,096,041) (5,777,915)
----------- -----------
Net Equity Value......................................... $ 1,259,734 $(1,606,079) (227.49)%
=========== ===========
Per Unit Value........................................... $ 38,755 $ 25,438 (34.36)%
=========== ===========
</Table>
6
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
ARV PIII -- 287 UNITS
(Chandler Villas & Villa Las Posas)
<Table>
<Caption>
2001 FORECAST
------------------------------------------------
TOTAL CHANDLER VILLAS VILLA LAS POSAS
------------ --------------- ---------------
EBITDAR(1)......................................... $ 2,727,995 $ 900,830 $ 1,827,164
Management Fees*................................... (343,912) (142,648) (201,264)
CAP EX**........................................... (287,000) (164,000) (123,000)
------------ ----------- -----------
NOI................................................ $ 2,097,082 $ 594,182 $ 1,502,900
CAP RATE........................................... 11% 11%
------------ ----------- -----------
Value.............................................. $ 19,064,384 $ 5,401,653 $13,662,730
Debt............................................... (13,786,107) (5,746,562) (8,039,545)
------------ ----------- -----------
Net Equity Value................................... $ 5,278,277 $ (344,909) $ 5,623,186
============ =========== ===========
</Table>
---------------
(1) With Partnership Admin. Fees Deduction.
* Management Fees -- 5% of Total Revenue
** CAP EX -- $1,000 per unit
7
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
ARV PIII -- 287 UNITS
(Chandler Villas & Villa Las Posas)
<Table>
<Caption>
2001 FORECAST
------------------------------------------------
TOTAL CHANDLER VILLAS VILLA LAS POSAS
------------ --------------- ---------------
EBITDAR(1)......................................... $ 2,892,096 $ 963,857 $ 1,928,238
Management Fees*................................... (343,912) (142,648) (201,264)
CAP EX**........................................... (287,000) (164,000) (123,000)
------------ ----------- -----------
NOI................................................ $ 2,261,183 $ 657,209 $ 1,603,974
CAP RATE........................................... 11% 11%
------------ ----------- -----------
Value.............................................. $ 20,556,212 $ 5,974,627 $14,581,585
Debt............................................... (13,786,107) (5,746,562) (8,039,545)
------------ ----------- -----------
Net Equity Value................................... $ 6,770,105 $ 228,065 $ 6,542,040
============ =========== ===========
</Table>
---------------
(1) Without Partnership Admin. Fees Deduction.
* Management Fees -- 5% of Total Revenue
** CAP EX -- $1,000 per unit
8
EXECUTIVE FINANCIAL SUMMARY
FOR THE PERIOD ENDING DECEMBER 31, 2001
<Table>
<Caption>
DESCRIPTION BUDGET PRIOR YEAR
----------- ------------ ------------
CHANDLER VILLA, LLC
Rental Revenue.............................................. 2,468,806.00 2,459,908.90
AL Services................................................. 207,242.00 177,552.11
Other....................................................... 76,792.00 65,220.22
TOTAL REVENUE............................................... 2,752,840.00 2,702,681.23
OPERATING EXPENSE
Payroll..................................................... 1,107,818.00 918,082.08
Variable Expense............................................ 293,529.00 232,268.78
Utilities................................................... 220,142.00 214,790.27
Other Operating Expenses.................................... 331,046.00 303,233.63
TOTAL OPERATING EXPENSE..................................... 1,952,535.00 1,668,374.76
GROSS MARGIN................................................ 800,305.00 1,034,306.47
29.1% 38.3%
Other Expenses.............................................. 266,305.00 288,534.41
EBITDAR..................................................... 534,000.00 745,772.06
19.4% 27.6%
EBITDA...................................................... 534,000.00 745,772.06
Interest.................................................... 485,696.00 432,295.45
D&A......................................................... 348,240.00 350,483.81
Non-Operating Inc/Exp....................................... (4,692.00) (539.18)
NET INCOME (LOSS)........................................... (295,244.00) (36,468.02)
</Table>
9
VILLA LAS POSAS
24 LAS POSAS ROAD
CAMARILLO, CA 93010
LICENSE NUMBER: 565800476
(PICTURE)
Located in the heart of Camarillo, Villa Las Posas offers 123 studio and
one-bedroom apartments to seniors desiring the ultimate in retirement or
assisted living. The three-story, Mediterranean-style complex is situated on
over three acres of land complete with gardens and walking paths. Villa Las
Posas is ideally located alongside a neighborhood park, with a nearby shopping
mall, doctors' offices, library, community hospital and church.
(MAP)
10
ARV ASSISTED LIVING, INC.
COMMUNITY SUMMARY
COMMUNITY: Villa Las Posas
ADDRESS: 24 Las Posas Road
Camarillo, CA 93010
OWNER: ARV PIII
<Table>
PHYSICAL INFORMATION:
Year Built.................................................. 1997
Units....................................................... 123
Licensed Beds............................................... 140
Square Footage.............................................. 89,000
No. Floors.................................................. 3
No. Buildings............................................... 1
Sprinklered................................................. Yes
EBITDAR (AFTER MGT & ADMIN FEES):
1998........................................................ $ 864,231
1999........................................................ $ 1,290,473
2000........................................................ $ 1,516,518
2001 (Forecast)............................................. $ 1,625,103
EBITDAR MARGIN (AFTER MGT & ADMIN FEES):
1998........................................................ 33%
1999........................................................ 38%
2000........................................................ 40%
2001 (Forecast)............................................. 41%
AVERAGE OCCUPANCY:
12/31/98.................................................... 81.3%
12/31/99.................................................... 98.6%
12/31/00.................................................... 98.1%
4/30/01..................................................... 97.6%
12/31/01 (Forecast)......................................... 99.1%
ASSISTED LIVING PENETRATION:
12/31/98.................................................... 31.1%
12/31/99.................................................... 35.1%
12/31/00.................................................... 42.0%
2/28/01..................................................... 49.2%
12/31/01 (Forecast)......................................... 40.1%
VALUE INFORMATION(A):
Value at 12/31/00........................................... $13,224,399
Value at 12/31/01 (Forecast)................................ $14,214,568
</Table>
---------------
(a) Value calculated based upon EBITDAR (after management and administration
fees and $500/unit capital expenditure reserve) using an 11% capitalization
rate.
11
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
APRIL 2001
(With Management and Administration Fees Deduction)
<Table>
<Caption>
VILLA LAS POSAS
123 UNIT
97.6%
----------------------------------
2000 ACTUAL 2001 BUDGET CHANGE
----------- ----------- ------
EBITDAR Before Management & Administration Fees............ $ 1,795,887 $ 1,925,167 7.20%
Management Fees -- 5%...................................... (189,502) (199,200)
Administration Fees -- 10%................................. (90,201) (100,865)
----------- -----------
EBITDAR After Management & Administration Fees............. 1,516,184 1,625,103
CAP EX @ $500/Unit......................................... (61,500) (61,500)
----------- -----------
NOI........................................................ $ 1,454,684 $ 1,563,603 7.49%
CAP RATE................................................... 11.0% 11.0%
----------- -----------
Value...................................................... $13,224,399 $14,214,568
Debt....................................................... (8,080,798) (8,047,021)
----------- -----------
Net Equity Value........................................... $ 5,143,601 $ 6,167,547 19.91%
=========== ===========
Per Unit Value............................................. $ 107,515 $ 115,566 7.49%
=========== ===========
</Table>
12
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
APRIL 2001
(Without Administration Fees Deduction)
<Table>
<Caption>
VILLA LAS POSAS
123 UNIT
97.6%
----------------------------------
2000 ACTUAL 2001 BUDGET CHANGE
----------- ----------- ------
EBITDAR Before Management & Administration Fees............ $ 1,795,887 $ 1,925,167 7.20%
Management Fees -- 5%...................................... (189,502) (199,200)
----------- -----------
EBITDAR After Management & Administration Fees............. 1,606,385 1,725,968
CAP EX @ $500/Unit......................................... (61,500) (61,500)
----------- -----------
NOI........................................................ $ 1,544,885 $ 1,664,468 7.74%
CAP RATE................................................... 11.0% 11.0%
----------- -----------
Value...................................................... $14,044,411 $15,131,523
Debt....................................................... (8,080,798) (8,047,021)
----------- -----------
Net Equity Value........................................... $ 5,963,613 $ 7,084,502 18.80%
=========== ===========
Per Unit Value............................................. $ 114,182 $ 123,021 7.74%
=========== ===========
</Table>
13
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
ARV PIII -- 287 UNITS
(Chandler Villas & Villa Las Posas)
<Table>
<Caption>
2001 FORECAST
------------------------------------------------
TOTAL CHANDLER VILLAS VILLA LAS POSAS
------------ --------------- ---------------
EBITDAR(1)......................................... $ 2,727,995 $ 900,830 $ 1,827,164
Management Fees*................................... (343,912) (142,648) (201,264)
CAP EX**........................................... (287,000) (164,000) (123,000)
------------ ----------- -----------
NOI................................................ $ 2,097,082 $ 594,182 $ 1,502,900
CAP RATE........................................... 11% 11%
------------ ----------- -----------
Value.............................................. $ 19,064,384 $ 5,401,653 $13,662,730
Debt............................................... (13,786,107) (5,746,562) (8,039,545)
------------ ----------- -----------
Net Equity Value................................... $ 5,278,277 $ (344,909) $ 5,623,186
============ =========== ===========
</Table>
---------------
(1) With Partnership Admin. Fees Deduction.
* Management Fees -- 5% of Total Revenue
** CAP EX -- $1,000 per unit
14
ARV ASSISTED LIVING, INC.
ESTIMATED VALUATION
ARV PIII -- 287 UNITS
(Chandler Villas & Villa Las Posas)
<Table>
<Caption>
2001 FORECAST
------------------------------------------------
TOTAL CHANDLER VILLAS VILLA LAS POSAS
------------ --------------- ---------------
EBITDAR(1)......................................... $ 2,892,096 $ 963,857 $ 1,928,238
Management Fees*................................... (343,912) (142,648) (201,264)
CAP EX**........................................... (287,000) (164,000) (123,000)
------------ ----------- -----------
NOI................................................ $ 2,261,183 $ 657,209 $ 1,603,974
CAP RATE........................................... 11% 11%
------------ ----------- -----------
Value.............................................. $ 20,556,212 $ 5,974,627 $14,581,585
Debt............................................... (13,786,107) (5,746,562) (8,039,545)
------------ ----------- -----------
Net Equity Value................................... $ 6,770,105 $ 228,065 $ 6,542,040
============ =========== ===========
</Table>
---------------
(1) Without Partnership Admin. Fees Deduction.
* Management Fees -- 5% of Total Revenue
** CAP EX -- $1,000 per unit
15
EXECUTIVE FINANCIAL SUMMARY
FOR THE PERIOD ENDING DECEMBER 31, 2001
<Table>
<Caption>
DESCRIPTION BUDGET PRIOR YEAR
----------- ------------ ------------
VILLA LAS POSAS, LLC
Rental Revenue.............................................. 3,463,611.00 3,276,358.43
AL Services................................................. 464,931.00 468,809.43
Other....................................................... 55,448.00 44,875.15
TOTAL REVENUE............................................... 3,983,990.00 3,790,043.01
OPERATING EXPENSE
Payroll..................................................... 1,250,869.00 1,141,774.62
Variable Expense............................................ 320,595.00 370,943.85
Utilities................................................... 135,878.00 127,932.03
Other Operating Expenses.................................... 182,590.00 196,234.97
TOTAL OPERATING EXPENSE..................................... 1,889,932.00 1,836,885.47
Gross Margin................................................ 2,094,058.00 1,953,157.54
52.6% 51.5%
Other Expenses.............................................. 468,955.00 436,638.83
EBITDAR..................................................... 1,625,103.00 1,516,518.71
40.8% 40.0%
EBITDA...................................................... 1,625,103.00 1,516,518.71
Interest.................................................... 717,339.00 704,992.79
D&A......................................................... 669,540.00 657,179.47
NET INCOME (LOSS)........................................... 238,224.00 154,638.30
</Table>
16
ARV ASSISTED LIVING, INC.
CAPITAL EXPENDITURES HISTORY
ARV PIII
<Table>
<Caption>
$ CAPITAL EXPENDITURES CAP-X PER UNIT
---------------------------------------------------------------- ------------------------------------------
AVAILABLE 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001
ARV P111 UNITS ACTUAL ACTUAL ACTUAL ACTUAL BUDGET ACTUAL ACTUAL ACTUAL ACTUAL BUDGET
-------- --------- -------- -------- -------- -------- -------- ------ ------ ------ ------ ------
Villas Las Posas
[a]................ 122 N/A 584,996 17,016 39,915 61,200 N/A $4,795 $139 $327 $502
Chandler Villas...... 159 110,430 23,240 147,870 153,225 102,296 $695 $ 146 $930 $964 $643
TOTAL................ 281 $110,430 $608,235 $164,886 $193,140 $163,496 $695 $2,165 $587 $687 $582
</Table>
---------------
[a] Community under construction.
17
ARV ASSISTED LIVING, INC.
MORTGAGES BY MATURITY DATE -- NON-ARV-CONSOLIDATED
AS OF MAY 31 2001
<Table>
<Caption>
MATURITY BALANCE AT TYPE OF
COMMUNITY NAME LENDER NAME DATE 31-MAY-01 RATE INTEREST RATE
-------------- ----------- -------- ------------ -------- -------------
PARTNERSHIP OWNED COMMUNITIES
(ARV IS GENERAL PARTNER)
Chandler Villas.............. Red Mortgage Capital Feb-36 $ 5,775,397 Fixed 8.06%
Villa Las Posas.............. Banc One Jan-02 $ 8,039,545 Fixed 9.15%
------------
TOTAL DUE PARTNERSHIP OWNED
COMMUNITIES (PIII)......... $ 13,814,942
============
APARTMENTS
PARTNERSHIP OWNED COMMUNITIES
(ARV IS GENERAL PARTNER)
Meadow View/Springboro....... Bank United May-10 $ 3,556,450 Fixed 9.125%
Inn at Woodbridge............ General Electric Credit Corporation May-12 $ 3,722,248 Fixed 10.00%
Inn at Woodbridge............ Orange County Housing Authority Jun-28 $ 560,510 Fixed 3.00%
------------
TOTAL DUE PARTNERSHIP OWNED
COMMUNITIES (APARTMENTS)... $ 7,839,208
------------
TOTAL ARV NON-CONSOLIDATED
MATURITIES................. $ 21,654,150
============
Total Fixed Rate
Maturities................. 100% $ 21,654,150 Fixed
Total Variable Rate
Maturities................. 0% $ 0 Variable
------------
TOTAL MATURITIES............. $ 21,654,150
============
MATURITIES BY YEAR
------------------------------------------------------------------
2001........................................................................ $ 0
2002........................................................................ $ 8,039,545
2003........................................................................ $ 0
2004........................................................................ $ 0
Thereafter.................................................................. $ 13,614,605
------------
TOTAL....................................................................... $ 21,654,150
============
</Table>
18
(ARV ASSISTED LIVING LOGO)
MEMO
<Table>
<Caption>
TO: Douglas Pasquale
FROM: Douglas Armstrong
DATE: June 22, 2001
SUBJECT: Chandler Villas
</Table>
PREPAYMENT PENALTY
The Chandler Villas promissory note provides that the borrower may not
prepay the note, in whole or in part, prior to March 1, 2006. Commencing on
March 1, 2006, the note may be prepaid provided such prepayment is accompanied
by a prepayment penalty calculated as follows:
<Table>
<Caption>
PREPAYMENT PERIODS PREPAYMENT PENALTY
------------------ ------------------
March 1, 2006 through February 28, 2007..................... 5%
March 1, 2007 through February 29, 2008..................... 4%
March 1, 2008 through February 28, 2009..................... 3%
March 1, 2009 through February 28, 2010..................... 2%
March 1, 2010 through February 28, 2011..................... 1%
March 1, 2011 and thereafter................................ None
</Table>
ARVP III VOTING REQUIREMENTS
The ARVP III Limited Partnership Agreement provides that no General Partner
may conduct the sale of substantially all of the partnership assets except on a
Majority Vote of the Limited Partners. "Majority Vote" is defined as the vote or
written consent of Limited Partners who own more than fifty percent (50%) of the
partnership interests.
19
AMERICAN RETIREMENT VILLAS PROPERTIES III
PARTNERSHIP INFORMATION
OPENED: October-89
CLOSED: December-92
UNITS: 18,666
PRICE: $1,000/Unit
MINIMUM INVESTMENT: $5,000/$2,000 IRA
DISTRIBUTIONS FOR SAMPLE $5,000 (5 UNIT) INVESTMENT:*
CASH FLOW FROM OPERATIONS: $2,284
PROCEEDS OF SALE/REFINANCE: $3,882
TOTAL TO DATE: $6,166
---------------
* Based on an Investment made in October of 1989. Life-to-date distributions
will vary as much as ($850) for a $5,000 investment depending on date of
investment.
AMERICAN RETIREMENT VILLAS PROPERTIES III
PARTNERSHIP SCHEDULE K-1 DATA
<Table>
<Caption>
CAPITAL CAPITAL CAPITAL
ACCOUNT AT CONTRIBUTED WITHDRAWALS ACCOUNT
BEGINNING DURING INCOME AND AT END
YEAR OF YEAR YEAR (LOSS) DISTRIBUTIONS OF YEAR
---- ---------- ----------- ------ ------------- -------
1989....................................... 0 5,000 70 (59) 5,011
1990....................................... 5,011 0 (154) (188) 4,669
1991....................................... 4,669 0 (192) (341) 4,136
1992....................................... 4,136 0 (15) (313) 3,808
1993....................................... 3,808 0 (338) (175) 3,295
1994....................................... 3,295 0 (170) (750) 2,375
1995....................................... 2,375 0 (783) (75) 1,517
1996....................................... 1,517 0 (245) (125) 1,147
1997....................................... 1,147 0 106 0 1,253
1998....................................... 1,253 0 (362) (250) 641
1999....................................... 641 0 1,332 (2,603) (630)
2000....................................... (630) 0 (17) (106) (753)
(768) (4,985)
2001 Distributions......................... (1,181)
Total Cash Distributions................... (6,166)
</Table>
20
AMERICAN RETIREMENT VILLAS PROPERTIES III
SECONDARY SALES HISTORY
The following chart reflects all sales submitted for transfer wherein a
sales price per unit was reported:
2001
<Table>
<Caption>
QUARTER ENDING UNITS SOLD LOW HIGH AVERAGE
-------------- ---------- ---- ---- -------
January 31, 2001............................................ 201.000 $350 $416 $355
February 28, 2001........................................... 10.000 $461 $461 $461
March 31, 2001.............................................. 12.000 $265 $350 $279
April 30, 2001.............................................. 10.000 $265 $265 $265
May 31, 2001................................................ 10.000 $140 $140 $140
</Table>
21
ARV ASSISTED LIVING, INC.
FINANCIAL STATEMENT
VILLA LAS POSAS
FOR THE PERIOD ENDING AUGUST 31, 2001
AUG YTD 2001 FORECAST
--------- -------------
TOTAL REVENUE 2,681,599 $4,022,399
--------- ----------
TOTAL PAYROLL RELATED 802,291 $1,203,437
--------- ----------
TOTAL VARIABLE EXPENSE 208,787 $ 313,180
--------- ----------
OTHER EXPENSES 349,021 523,530
--------- ----------
TOTAL PROFESSIONAL FEES 218,554 $ 327,831
--------- ----------
EBITDAR 1,102,946 $1,654,420
EBITDAR PERCENT 41.1% 41.1%
80005 Interest Income (320) $ (480)
--------- ----------
TOTAL NON-OPERATING INCOME/EXPENSE (320) $ (480)
--------- ----------
83005 Interest Expense 491,167 $ 736,751
--------- ----------
TOTAL INTEREST EXPENSE 491,167 $ 736,751
--------- ----------
EBTDA 612,099 $ 918,149
EBTDA PERCENT 26.4% 22.8%
77505 Depreciation 337,796 $ 506,694
78005 Amortization 77,625 $ 116,437
--------- ----------
TOTAL DEPRECIATION & AMORTIZATION 415,421 $ 623,131
--------- ----------
NET INCOME (LOSS) 196,678 $ 295,018
========= ==========
ARV ASSISTED LIVING, INC.
FINANCIAL STATEMENT
CHANDLER VILLAS
FOR THE PERIOD ENDING AUGUST 31, 2001
AUG YTD 2001 FORECAST
--------- -------------
TOTAL REVENUE 1,932,843 $2,899,264
--------- ----------
TOTAL PAYROLL RELATED 721,870 $1,082,805
--------- ----------
TOTAL VARIABLE EXPENSE 183,018 $ 274,527
--------- ----------
OTHER EXPENSES 407,221 610,832
--------- ----------
TOTAL PROFESSIONAL FEES 129,818 $ 194,728
--------- ----------
EBITDAR 490,915 $ 736,373
EBITDAR PERCENT 25.4% 25.4%
80005 Interest Income (6,158) $ (9,238)
--------- ----------
TOTAL NON-OPERATING INCOME/EXPENSE 60,263 $ 90,394
--------- ----------
83005 Interest Expense 308,756 $ 463,134
83025 Int. Exp. MIP 16,867 $ 25,300
--------- ----------
TOTAL INTEREST EXPENSE 325,622 $ 488,434
--------- ----------
EBTDA 105,030 $ 157,545
EBTDA PERCENT 6.2% 5.4%
87010 Extraordinary Items - Net Tax 66,421 $ 66,421
77505 Depreciation 114,759 $ 172,139
78005 Amortization 4,975 $ 7,462
--------- ----------
TOTAL DEPRECIATION & AMORTIZATION 119,734 $ 179,601
--------- ----------
NET INCOME (LOSS) (81,125) $ (88,477)
========= ==========
ARV ASSISTED LIVING, INC.
PIII INVESTMENT ANALYSIS (CHANDLER VILLAS & VILLA LAS POSAS)
UNLEVERED RETURNS
ASSUMES 3% GROWTH ----->
----------------------------------------------------------------------------------------------
ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST
1999 2000 2001 2002 2003 2004
DEC YTD DEC YTD DEC YTD DEC YTD DEC YTD DEC YTD
----------------------------------------------------------------------------------------------
Total Revenue 5,792,582 6,492,724 6,921,663 7,129,313 7,343,192 7,563,488
---------------------------------------------------------------------------------------------------------------------------------
EBITDAR (Excld Mgt & Admin Fees) 2,369,506 2,704,660 2,736,876 2,818,982 2,903,552 2,990,658
---------------------------------------------------------------------------------------------------------------------------------
5.0% Mgt Fee 289,629 324,636 346,083 356,466 367,160 378,174
---------------------------------------------------------------------------------------------------------------------------------
Partnership Admin fee 91,225 124,783 116,465 126,252 111,868 120,317
---------------------------------------------------------------------------------------------------------------------------------
Less Capital Expenditures 166,886 193,140 163,496 287,000 295,610 304,478
---------------------------------------------------------------------------------------------------------------------------------
Un-levered Net Cash Flow 1,821,766 2,062,101 2,110,832 2,049,265 2,128,914 2,187,688
---------------------------------------------------------------------------------------------------------------------------------
Cash on cash return based on
$17.5 million invested* 10.4% 11.8% 12.1% 11.7% 12.2% 12.5%
=============================================================================================
--------------------------------------------------------------------------------------------
FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST
2005 2006 2007 2008 2009 2010
DEC YTD DEC YTD DEC YTD DEC YTD DEC YTD DEC YTD
--------------------------------------------------------------------------------------------
Total Revenue 7,790,393 8,024,104 8,264,828 8,512,772 8,768,156 9,031,200
-------------------------------------------------------------------------------------------------------------------------------
EBITDAR (Excld Mgt & Admin Fees) 3,080,378 3,172,789 3,267,973 3,366,012 3,466,993 3,571,002
-------------------------------------------------------------------------------------------------------------------------------
5.0% Mgt Fee 389,520 401,205 413,241 425,639 438,408 451,560
-------------------------------------------------------------------------------------------------------------------------------
Partnership Admin fee 129,065 138,124 147,507 157,228 167,303 177,746
-------------------------------------------------------------------------------------------------------------------------------
Less Capital Expenditures 313,612 323,020 332,711 342,692 352,973 363,562
-------------------------------------------------------------------------------------------------------------------------------
Un-levered Net Cash Flow 2,248,181 2,310,440 2,374,514 2,440,454 2,508,309 2,578,134
-------------------------------------------------------------------------------------------------------------------------------
Cash on cash return based on
$17.5 million invested* 12.8% 13.2% 13.6% 13.9% 14.3% 14.7%
=============================================================================================
* Investment Calculation:
$360/unit x 18,666 units $ 6,720,000
Assumed Debt $ 13,770,000
------------
Gross Investment $ 20,490,000
Less Net Working Capital ($ 3,030,000)
------------
Net $ 17,460,000
============
ARVPIII
LIQUIDATION ANALYSIS
Value of Real Estate Assets $ 19,200,000
Less:
Selling costs @ 5% (960,000)
Prepayment penalties (290,000)
Mortgages (13,770,000)
------------
Net Proceeds from Real Estate $ 4,180,000
Net Working Capital
Cash Net of Liabilities 2,170,000
Claremont Note --
Impounds 785,000
Other 75,000
------------
$ 3,030,000
------------
ARVPIII Net Liquidation Value $ 7,210,000
General and Special Partners Distribution (1%) (72,000)
------------
Estimated Unitholder Distribution $ 7,138,000
------------
Value Per Unit @ 18,666 Units $ 382.41(A)
============
ARV $360 Offer as a Percentage of Liquidation Value 94.14%
============
C3 Capital Offer as a Percentage of Liquidation Value 78.45%
============
(A) Assuming it would take one year to complete liquidation of the Partnership
at the values indicated above (this assumption appears conservative given the
best offer on the real estate is $18,200,000 or $1,000,000 less than the
$19,200,000 reflected above), the present value at a 10% discount rate of the
liquidation value is $347.65 and ARV's offer as a percentage of the discounted
liquidation value is $103.55%.